In a ruling set down on June 9, delayed significantly due to the COVID-19 pandemic, new ATO rules will treat car parks at shopping centres, hospitals, universities and airports as “commercial” facilities for fringe benefit tax purposes where they offer all-day parking – covering at least six hours between 7am and 7pm.
This is cause for serious concern for car dealers, many of which are captured into tens of thousands of dollars in extra FBT liabilities by the expansion of the definitions of a commercial car park. For a large multi-franchise dealership with staff parking for 100 people, it could run into millions of dollars.
Due to come into force from 1 April 2022 (the 22/23 FBT year), the move means car dealers that provide staff with space to park their cars and are located within 1 kilometre of commercial car park facilities face higher fringe benefit tax bills.
Car dealers need to immediately assess their possible new tax liability to assess how this will reflect in next year’s budgets. If there is staff parking available on the dealership site, it needs to be thought through and considered by dealers in terms of employee contracts and parking policies.
This is a big change in interpretation by the ATO.
On November 13, 2019, the commissioner issued draft Taxation Ruling TR 2019/D5 titled Fringe Benefits Tax: car parking benefits (the draft ruling), setting out the commissioner’s preliminary views on when the provision of car parking is a ‘car parking benefit’ for the purposes of the FBT Act.
The commissioner’s view in the draft ruling, which will replace TR 96/26, now recognises that a car park, which satisfies all other requirements, can still be considered a ‘commercial parking station’ even if:
- Its contractual terms restrict who may use the car park, provided any member of the public that accepts these restrictions can use the car park,
- Its fee structure discourages all-day parking with higher fees.
The implication is that public car parks attached to hospitals, shopping centres and universities could potentially be determined to be commercial car parks. If these are in a dealership’s one-kilometre radius, a car parking fringe benefit may arise.
This is a departure from the commissioner’s previous position which was that car parking facilities, with a primary purpose other than providing all-day parking, that usually charge penalty rates significantly higher than the rates chargeable for all-day parking at commercial all-day parking facilities are NOT commercial car parks.
The commissioner specifically stated that parking provided for short-term shoppers or hotel guests was not parking at a commercial car park. That view has now changed and is legislated as of July 1, 2021.
The following is an example of a dealership that is captured by the new FBT rules
The dealership is in a suburban setting with no commercial car parking areas within a kilometre but there is a Westfield style shopping centre within a kilometre that is free for shoppers but charges $26 a day if you stay for longer than five hours.
This now comes into play for FBT purposes.
Here is an example calculation of the FBT applicable to the dealership if 10 spaces were provided to employees for the FBT year.
FBT car parking benefit calculation assumptions:
- $26 per day is the lowest rate within a one-kilometre radius,
- 228 workdays per year,
- Car parking was provided every workday for more than four hours,
- 10 car spaces provided for employee parking.
As you can see from the above, this new ruling from the ATO can have a significant impact on a dealer’s FBT liability. Dealers need to assess their current situation regarding car parking and make changes required to limit their FBT exposure for the FBT year 2022/23.
Car parking fringe benefit defined (source ATO)
A car parking fringe benefit will generally arise if an employer provides car parking to an employee and all the following conditions are satisfied:
- the car is parked at premises owned or leased by, or otherwise under the control of, the provider (usually the employer)
- the car is parked for a total of more than four hours between 7am and 7pm on any day of the week
- the car is owned by, leased to, or otherwise under the control of, an employee, or is provided by the employer
- the parking is provided in respect of the employee’s employment
- the car is parked at or near the employee’s primary place of employment on that day
- the car is used by the employee to travel between home and work (or work and home) at least once on that day
- there is a commercial parking station that charges a fee for all-day parking within one kilometre of the premises on which the car is parked and
- the commercial parking station fee for all-day parking is more than the car parking threshold, and
- at the beginning of the fringe benefits tax (FBT) year, the commercial parking station fee for all-day parking was more than the car parking threshold.
Car parking is exempt from FBT where an employer provides parking to an employee and not all of the above conditions are satisfied – for example, if car parking is provided for less than a total of four hours between 7am and 7pm.
Small business and other car parking exemptions
Car parking benefits are exempt from FBT where the benefits are provided:
- by employers who meet the conditions of the small business car parking benefits exemption
- by certain research, education, religious and charitable institutions
- for employees with a disability (irrespective of the type of employer).
The small business car parking benefits exemption applies if all the following conditions are satisfied:
- the parking is not provided in a commercial car park
- the employer is not a government body, a listed public company, or a subsidiary of a listed public company
- for the last income year before the relevant FBT year, either the employer’s
- gross total income was less than $10 million
- turnover was less than $10 million (less than $50 million for benefits provided on or after 1 April 2021).
By Steve Bragg